When shopping for a savings account, I don't believe it should necessarily be all about the yield. You should also consider how much it costs to bank with your financial institution because bank fees can very easily neutralize the interest you are earning on your savings.

Even before the financial crisis, I had been noticing just how costly it was to keep our money in the safety of our banks. Now that banks are shaking in their virtual boots, thanks to the credit squeeze and recession, they're doing what it takes to keep afloat, even if it means passing on more costs to their customers. But we consumers don't need to sit down and accept the charges they keep handing out to us. There are things we can do to avoid having to pay unnecessary bank fees. I'm all for helping compensate my bank for the services they render, just as long as the fees are reasonable. But I'm also for watching my bottom line and making sure I'm making the most out of my checking and high interest savings accounts.

Here are some tips I've put together to help you avoid getting hit by pesky bank fees:

Lower Your Banking Costs With These Tips

1. Keep track of your accounts.
First things first -- know what you are signing up for! When you open a new savings account or other bank product, make sure you check the terms carefully and know just what kind of fees you can be charged. Surprisingly, not everyone looks at the terms when applying for an account since their eye is squarely on the interest rate earned. Once you've got an account, monitor any fees that come your way by regularly reviewing your account's statements and reports. One more thing: once you've established your accounts, make sure you remember you've got them. Surveys point to the fact that a percentage of bank customers don't even remember where they've stashed some of their money. Honest.

2. Select bank products with good rates and low or no fees.
Don't just chase rates. Don't ignore the other aspects of your bank account just because it happens to give you a rate you can't refuse. As mentioned, when shopping for an account, you should check on the account's charges and fees, the bank's stability and reliability, their customer service, etc. There are online saving accounts out there that have no or low fees, including those offered by well-known banks which I've previously reviewed. Check out what I've written about the HSBC Direct online savings account and Emigrant Bank products, which have minimal bank fees. Make sure to read the fine print on any account that's recommended to you. Some fees to watch out for: ATM fees, cash advances, stop payment, return deposit fees, overdraft charges, insufficient fund fees, excess withdrawal fees, account maintenance fees. So how much does your bank charge you?

3. Maintain more than the minimum in your account.
There are some banks that offer online savings accounts that have a no balance minimum. But it's always safer to have a savings buffer to make sure you escape fees that the bank may levy upon you as a consequence of having too small a balance in your account. Some specific fees that you may inadvertently get charged if you have a small balance include insufficient fund penalties, bounced check fees or overdraft charges. Have enough money in your savings account to cushion you from such fees. Or you can try these strategies: arrange for overdraft protection by linking your checking account to your savings account if your bank permits this, and consolidate your accounts into one place to achieve a higher balance.
4. Watch your transactions.
You can avoid incurring penalties and fees by keeping an eye on your balance and by being on time with any payments you need to make -- whether it's to your bank or other financial institution you're doing business with. By using budgeting tools, I've actually been able to get a better handle on the transactions I make on a regular basis.

5. Foster a relationship with your banker.
It pays to know someone from the inside. I've been banking with a particular bank for quite a long time now, and have been assigned a personal banker whom I deal with directly. I've seen just how much easier it is to have someone on my side to help me out with issues, concerns and even complaints I may have from time to time. A lot of banks and institutions are hoping to keep you as a loyal customer, so by communicating your concerns with them, you may just find some of your fees waived for good. A personal banker may also be able to suggest other products for you if the account you currently have doesn't seem like a good fit.

6. Be wary of services you don't need.
The flipside to having such a tender, loving banker on your side is that they may try to "sell" you unnececessary services that can cost you a mint. Here's an example: to avoid bounced check fees of $25 to $35 a piece, banks will offer to cover you. With these services, you may avoid embarrassment and merchant fines but you won't avoid the costs, which you're simply deflecting through your bank. You see, if you sign up for courtesy overdraft protection (otherwise known as a sneaky form of bounced check protection), you'll be paying your bank huge fees ($22 a pop) for making sure your checks are all good. Instead of paying a bounced check fee, you'll be paying a courtesy overdraft protection fee. So do you really need this kind of protection? Not really, if you're able to keep on top of your bank balance and transaction activity each month.

7. Don't bounce checks.
Some people try to tempt fate by writing out checks, postdating them and crossing their fingers that their money makes it into their account before the funds get withdrawn. I don't think it's worth taking the risk of playing this game when the penalties for error are onerous. Using checks in this manner is a bad habit that has cost many people thousands of dollars in fees and penalties each year.

8. Use ATMs with care.
ATMs are convenient, but if you really want to save money, be aware of what kind of ATM you are using. If there are charges for using another bank's ATM, then limit your ATM use to those machines from your own bank. Seems straightforward enough, but people don't realize just how much convenience can cost them until they see those ATM charges in their monthly statements. Many banks charge non-customers $3 a transaction for the use of their machines.

9. Look into credit unions or small local banks.
I hear this suggestion made quite often: join a credit union. As a member of a credit union, you become part owner of this non-profit enterprise. You may get better rates and receive fewer and smaller fees when dealing with your institution. There seems to be a lot more advantages to taking your business to a credit union these days so why not try one out? Is there any downside to opening an account at a credit union? Perhaps there are fewer choices of products or services to be had, and you may not have the same accessibility to ubiquitous ATMs or branches that you may be used to visiting. Credit unions and smaller banks may not have much of an online presence either (or may have limited online features). I suppose everything has tradeoffs!

10. Keep your money in a mattress.
I'm not really entirely serious here, but I'm quite aware of people who do hide a lot of their money at home, in home safes or in other odd places in the house. Not a great idea, with too much risk of loss and the erosion of your money's value due to inflation, but there are still folks out there who find this the most comfortable way to stash their cash. Maybe this story of a million dollars in someone's mattress may convince you that your money is safer somewhere else!

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Sally #1

I completely agree - great post! With all the information available on the Web alone, everyone can make their savings goals come true. Planning and researching is so important - why risk any of your money if you can avoid it? "First things first -- know what you are signing up for!" is the PERFECT way to express it - how much do we lose with hidden fees and charges? http://mozo.com.au/savings-accounts is a fantastic site I visited when I was researching - it's a financial product comparison site and saves so much hassle. Good luck saving :) Thanks!